Insurance plan changes were inevitable

The most surprising thing about President Obama's "If you like your plan, you can keep your plan" promise as the Affordable Care Act kicked in was that anybody believed him.

The three big factors in any health insurance policy are what it covers, how much of the cost for what it does cover still gets paid by the policyholder and which doctors and hospitals can be used. In the ACA, what's covered and how much folks can pay — two of the three — are fundamentally changing.

So how can anyone be surprised their health insurance plan is history?

It's like hearing a forecast of heavy snow for three days, then being shocked and aggravated to wake up and find your car buried in white powder.

"It's semantics, just like so much of the rhetoric being spun out there," said Christopher Schneeman, president of SevenHills Benefit Partners of St. Paul. "What Blue Cross and these other companies are saying is that [an existing policy] is not health insurance anymore. What you had doesn't meet the legal definition of health insurance."

Maybe what the president actually meant back in 2009 doesn't matter, since what's important is what elected officials do, not say. And anyone paying any attention had to understand that the ACA was making such fundamental changes to health insurance that any promise of no changes was suspect the moment it was said.

A lot of folks had been complaining that they couldn't quit their jobs because of a known medical condition that could keep them from getting new insurance coverage if they left their employer's plan. So, because of the ACA, that's changed.

Women of childbearing years seemed to pay too much for health insurance due to the costs of maternity and ­newborn care. Now that's changed, too.

Most are in group plans

The bulk of Americans are insured in group plans, but these changes are being felt the most in the individual market. People who buy for themselves of course pay the whole bill, so they try to keep down costs by paring back benefits and taking more out-of-pocket risk.

And it's that last factor, changing out-of-pocket costs, that might be having the ­biggest impact. To advocates of the ACA, affordability meant not just getting the 48 million or so Americans without health insurance some coverage. It also meant trying to keep medical costs from ­routinely kicking even people with health insurance into a financial abyss.

And there is a good ­argument here. It's clear now how medical costs contribute to most consumer bankruptcies. The firm NerdWallet this year said an estimated 56 million working-age Americans are so under the gun financially because of medical bills that many should maybe think about filing for bankruptcy protection.

The middle-class policyholder with a $9,000 annual deductible is going to have a major financial problem if his Achilles tendon ruptures while he's chasing the dog. The ACA's proponents knew that, so policies with a $9,000 deductible are now gone. The maximum out-of-pocket expense for an individual is generally going to be $6,350 next year.

There's a lot of turnover in the individual market, so insurers like Medica and Blue Cross and Blue Shield of Minnesota waited until this year before really talking to policyholders about any of this.

Change is coming

In addition to a thorough website, Medica put out a letter around Labor Day that said some changes were coming. A follow-up letter to policyholders discussed their own personal situations. Dannette Coleman, who heads the individual policy market for Minnetonka-based Medica, said "we did this in about as plain of language as we could."

Blue Cross grandfathered more than half of its 140,000 or so individual holders, and its letter to the rest was similar to Medica's. While Medica's has the edge on clarity and completeness, Blue Cross' enclosed flier with the title, "Why your rates change," was about as clear as anyone could write such things.

Neither used the term cancellation.

Scott Keefer, Blue Cross's vice president of policy and legislative affairs, said how a policyholder fared is really pretty simple.

If you had comprehensive coverage with relatively low out-of-pocket costs, your insurance may even cost less in 2014.

If you are the kind of person who opted out of coverage for things you doubted you needed, such as mental health or maternity care coverage, and if you were willing to risk a big deductible, then your costs are now going up.

And in that latter group, "there's a lot of anger," Schneeman said. "You may say it's now a lot better policy, but that's Washington. My clients say, 'I deliberately bought a $9,000 deductible because I can handle the risk and I did not want to pay the insurance company any more money.' "

No letter or flier

Schneeman saw no point in preparing a simple letter or flier, because the average situation means so little.

His firm primarily advises employers with group plans, yet it handles more than 2,000 individual policies. He ­analyzed his clients with a Blue Cross policy and found the average rate increase is about 18 percent, he said. "And I am pretty comfortable they'll be providing 18 percent more benefit."

But when it comes to individual cases, the new rates range from a decrease of 34 percent to an increase of 87 percent.

One of his clients, a 28-year-old musician, had a policy with a $9,000 deductible, the type of policy that's no longer considered insurance. The replacement policy takes the cost from $84 per month to $140, Schneeman said, an increase of about 67 percent that "to him was a million-percent increase."

At $84 a month, it had worked. He liked it. And despite assurances from his president, there's no keeping it.

Lee Schafer came to the Star Tribune after 15 years as a corporate officer, consultant and investment banker in the Twin Cities. He has been a columnist for Twin Cities Business magazine and was senior editor for Corporate Report Minnesota. Follow @LeeASchafer

If health care executives had no idea how the market was going to evolve four years ago as federal health care reform kicked in, one of the smartest things to do is what Park Nicollet did, and that's merge with HealthPartners.